Last Updated on February 11, 2022
No matter it’s Slack, Discord, or Teams, all of them are free for the users. If they are free, then it’s a non-profit organization, right?
Well, that’s not the case with Slack! This platform like the other competitors of Slack affords you free features but they gain their profit too! How does Slack make money if it is free? That’s what we are going to discuss today!
Slack Business Model
So, you went for Slack download Mac and see that it is a free app; at least that’s what it advertises. Then how is Slack earning money? How can an app earn money if it’s free? This is what includes the business model of Slack. We will be going through this to let you know how Slack makes money and clear your confusion.
A specific sum of organizations requires special features to continue their work. And so, they pay a premium so that they can enjoy the special features. Among these features, the access to the unlimited communication history is one. Also, additional file storage is necessary for some users including the unlimited app integration.
Apart from this, screen sharing and statistics are common requirements that some organizations need. And so, they pay for the premium version to get these facilities. Slack has no plans to run ads in the future. This platform is based on a simple business model. They charge monthly fees to afford the required features.
The charge for a month is about $6.67 for the standards subscription. However, there are plus subscriptions for added features too. This one will cost about $12.50. The larger organizations require more management features than the smaller ones. And for them, Slack came up with the Enterprise Grid facility. This will help the organizations that have tens of thousands of users to deal with.
Slack is determined to benefit the users. And so, the users are only charged per worker actively using the software. And it’s not for “per seat” if you are dealing with Slack.
The platform is loved by the users for the management features. And so, in April 2019, it got more than 95000 organizations which include three or more users that are on the premium subscription plan. These users are called Paid Customers and they are about 16% of the total users of Slack. The number is 600000, which is surely a good sum.
According to the company, among the paid customers, 575 users accounted for about 40% of its revenue in FY 2019. Overseas organizations accounted for about 36% of the total revenue. When its uptime is less than 99.99%, Slack gives credits to the customers too.
When it comes to the engagement on Slack, no doubt it’s high. The active use topping was about 50 million hours for the last week in January 2019. At the same period, the paid users averaged about nine hours connected to the App through one device (at least.) They actively spent more than 90 minutes in this app.
Notes
- This platform is used by more than 600000 organizations and there are three or more employees according to Slack
- In 2019 January, it generated revenue of $400.6 million. Also, it is necessary to note that it increased about 82% from 2018.
- In Slack, more than 95000 organizations use the premium features and are on the paid subscription plan according to a survey in 2019.
- Slack and its other competitors are different when it comes to the charging method. It only charges the organizations for the active users. The platform follows a fair billing policy which is loved by the users.
Slack’s Future Goals
Slack was launched back in August 2013 and it was initially designed for desk worker collaboration. And it gained traction. After a few months, Slack raised $42.8 million. And finally, it got its hands on a valuation of $250 million. With this expansion, the company hopes to continue this momentum hitting the stock market.
The net dollar retention rate or NDR was 143% in January 2019. In a filing, Slack said that their NDR rate is a reflection of the rapid pace of adoption. And thus, the usage has spread within and across the teams.
According to Slack, these factors will help to reach a high lifetime value of the organization. The company has plans on expanding its business and platform in international markets. Slack is now accessible in more than 150 countries.
Thus, the company is interested in investing in product development and partnership. Also, they are interested in customer experience and support including sales and marketing. According to them, it chases profitability.
Profit and Challenges
We agree that Slack has hit the ground running and also, it is enjoying growth over a few years now. But we can’t deny the fact that the growth of Slack is slowing day by day. According to the annual revenue, it grew by 82% in 2019.
If it is compared to the previous year, the annual revenue growth was about 110%. So, it is clear that the growth is slowing. In 2020, the grown was 67% (the first quarter) but in the last part, it grew to 89%.
The Customers and the Growth
No matter the annual revenue growth is increasing or decreasing, the customers of Slack are satisfied. According to the users, they have found Slack very user-friendly. And this is why the users are keener to enjoy the paid plans.
As a result, more customers are switching to the premium plans to be Paid Customers. This helps them to enjoy the free features along with the paid ones to manage their business and help it grow. No doubt, one business is helping another and together they are growing. What else can be a perfect example of collaboration and growth!
How Does Slack Make Money: Video Guide
Wrap Up
Platforms like Slack will always face threats because every day, there is a new platform or app introduced to the users to snitch its place. However, if they keep their business more customer-concerned as they are doing now, there’s no doubt that they will have more users gradually. After all, that’s what growth is!
